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Bankruptcy and Self Settled Trust

Jay Adkisson reports on a recent court ruling where an Alaska Self Settled Trust did not protect the debtor from bankruptcy, and he asks whether the courts will invalidate self settled trusts (domestic or foreign).

So, as we sit here today, the Mortensen opinion basically says that under Bankruptcy Code section 548(e), Asset Protection Trusts do not provide protection in bankruptcy for a period of at least 10 years from the date the Trust was settled, where a purpose of the trust was to protect the trust assets from creditors of the settlor/beneficiary.

Will Mortensen be followed by other courts? If so, it may be the start of the death of the entire Domestic Asset Protection Trust industry — and that is not hyperbole.  (But note that this decision applies to Foreign Asset Protection Trusts too). So stay tuned.

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